How SaaS vendors can create a new-look channel

Channel engagements are changing rapidly.

By James Henderson Dec 15th 2017

In a world consumed by software-as-a-service (SaaS), vendors are realising that channel engagements are changing rapidly.

Because today, no longer do the same rules of engagement apply.

As business models and buying habits evolve, so must the vendors focused on capturing this new breed of channel partners.

“The best partners of SaaS vendors are those that mirror market and product fit,” observed Cat Morgan, former partner manager of strategic alliances at Vend.

“For example, if a vendor’s core audience is SMB then find born-in-the-cloud and for-the-cloud SMB-focused partners. This area of the industry is in hyper growth mode and the savvy partners are jumping on board early.

“These partners remunerate their sales team on monthly recurring revenue (MRR) rather than old-school upfront revenue targets. As a SaaS vendor, this is key - they’ll never get a sales person selling their $50 monthly subscription when they can sell some upfront tin and licenses for $5000 if they have a $10,000 target.”

Drawing on more than 15 years experience in the channel, Morgan acknowledged that partner engagement continues to evolve amid a world dominated by SaaS offerings and solutions.

Following hardware and software related channel roles at Cisco, Polycom, Check Point and Symantec, Morgan recently ran the partner ecosystem for Vend, an emerging SaaS business based in Auckland.

“I’ve spent the last three years in the SaaS space where channel models are relatively new and continually improving,” Morgan added.

As a result, the channel veteran believes SaaS vendors can create new-look channel networks by outlining clear goals and objectives in advance, alongside executive buy-in and deepened levels of enablement.

“Vendors must first start with what they want to achieve,” Morgan explained. “They must consider if they just want more leads or whether they need partners that can solve problems they can’t, e.g. through offering complementary solutions.

“There’s a good case for both and it depends on the issue that vendors are trying to solve, whether that’s keeping customers happy and around longer, or finding new ones.”

According to Morgan, channel leaders must also have executive buy-in to execute on new ideas and plans, spanning the entire organisation.

“Vendors will need financial investment but also support across the business,” Morgan advised. “It’s not just a sales channel but vendors need channel marketing, support and customer success teams onboard with this strategy too.

“Vendors possibly also need staffing resource and budgets to execute campaigns and promotional activity. But also, they must have a clear strategy internally for channel vs. direct business.

“There needs to be clear rules of engagement for vendors and partners. You cannot compete with your channel. No one wins.”

Competing with partners often signs the death warrant of a vendor in the channel, with the tech giants of the industry aware that reputations can be lost through an ill-advised pursuit of a customer.

Perhaps less clear however is how much control vendors should give up when engaging with the channel, especially in the context of SaaS.

“Referral partners typically send warm leads and vendors handle the customer from start to finish,” Morgan said. “Integration partners own the entire engagement including finding their own leads as well as post sales support.

“There can be some joint engagement depending on the complexity of a vendor on-boarding process, but it needs to be clear to partners and end-users to manage expectations and ensure the customer's journey is seamless and positive.”

Delving deeper, Morgan said that while standout integration partners are capable of building a “thriving business” from services rather than commission, vendors still need to reward them appropriately.

“Referral partners often get a one-off rebate and integrators get ongoing commission,” Morgan added. “Remuneration should be appropriate to the level of support and engagement provided by the channel partner.

“And often, teams can be so excited about the partnerships that thoughts as to how to enable them post announcement is forgotten.

“Vendors must think about how they are going to incorporate these partners into messaging strategies. It needs to be tailored to partner type and it needs to be easily updated as products change.”

As observed by Morgan, such an approach can come at a “huge cost” as SaaS vendors typically move at “rocketship speed”.

“The messaging needs to be slick and exciting while aligning to the vendor’s brand and culture,” Morgan added. “As a last thought, ideally vendors want partners whose values and culture align with their own.

“This ensures customers get a consistent experience. Ideally vendors want their best partners achieving the same or better NPS scores than they do. And don’t just track them on revenue, they bring a lot more to the table including stickier and happier customers.”